China Saves Nearly $10 Billion in 2023 Through Oil Purchases from Sanctioned Countries

This trend is causing a shift in oil sourcing from other regions like the Middle East and West Africa.

China has saved almost $10 billion in 2023 by making record oil purchases from countries under Western sanctions, such as Russia, Iran, and Venezuela, as per Reuters’ analysis.

The sanctions have unintentionally lowered oil import costs for China, allowing refineries, especially small independent ones termed “teapots”, to gain an advantage, even as the country encounters economic challenges.

Data suggests that China imported a historic 2.765 million barrels per day (bpd) of crude from the sanctioned countries within the first nine months of 2023, accounting for 25% of its total imports, up from 21% in 2022 and 12% in 2020.

This trend is causing a shift in oil sourcing from other regions like the Middle East and West Africa.

The savings significantly benefit independent refiners who are opportunistic and constantly search for cost-effective options.

China’s Foreign Ministry did not directly address specific inquiries from Reuters, but reiterated its stand against unilateral sanctions, emphasizing that its regular trade deserves respect and protection.

Detailing the imports:

  • From Russia: 1.3 million bpd of seaborne crude and 800,000 bpd of ESPO crude via pipeline. Following Moscow’s invasion of Ukraine, there has been a notable diversion of Russia’s oil flows to China and India, leading China to save approximately $4.34 billion on Russian oil imports.
  • From Iran: China saved around $4.2 billion by importing 1 million bpd, a record, from Iran. This surge in imports is credited to Tehran ramping up its production and offering significant discounts.
  • From Venezuela: Savings of about $1.17 billion resulted from purchasing Venezuelan oil, with inflows at roughly 430,000 bpd.

The U.S. State Department highlighted the broader impact of the sanctions, noting the hyperinflation in Iran and the plunge of its currency.

They affirmed the continuation of sanctions on Venezuela, adding that Venezuela’s relationship with China underscores its global isolation.

Notably, while major state refiners like Sinopec and PetroChina abstained from buying Iranian and Venezuelan crude, “teapots” capitalized on the discounted oil.

In Shandong province, these teapots operated at 65.7% of capacity in the first three quarters of 2023, yielding margins substantially higher than the previous year.

However, regulatory limits and potential U.S. sanction enforcements could cap China’s savings in the future.